Summary
declining to find any certified mail requirement in Section 1692g, whether for debt collectors sending the validation notice or consumers sending a dispute
Summary of this case from Krawczyk v. Centurion Capital Corp.Opinion
NO. 1:02-cv-01100-JDT-TAB.
April 6, 2004
ENTRY ON CROSS MOTIONS FOR SUMMARY JUDGMENT AND COUNTER-CLAIMANT'S MOTION FOR SUMMARY JUDGMENT
This Entry is a matter of public record and is being made available to the public on the court's web site, but it is not intended for commercial publication either electronically or in paper form. Although the ruling or rulings in this Entry will govern the case presently before this court, this court does not consider the discussion in this Entry to be sufficiently novel or instructive to justify commercial publication or the subsequent citation of it in other proceedings.
Plaintiff, Jane Walters, brings suit against Defendant, PDI Management Services ("PDI"), under the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et. seq. Plaintiff contends that Defendant violated provisions of the Act when PDI attempted to collect a delinquent debt from Ms. Walters. PDI filed a counter claim against Ms. Walters for breach of contract, or in the alternative accounts stated, to collect on the overdue debt. This matter is before the court on the parties' cross motions for summary judgment on the Plaintiff's claim under the FDCPA, and PDI's motion for summary judgment on PDI's counter-claim against Ms. Walters to collect the overdue debt. The court decides these matters as follows:
I. Background Facts
Ms. Walters resides in Indianapolis, Indiana. (Compl. ¶ 3; Answer ¶ 3.) She became obligated to Chase Manhattan Bank ("Chase") on a credit card agreement. (Nestel 1st Supplemental Aff. ¶¶ 4-9.) On or about September 19, 2000, Chase sold Ms. Walters' account to Vision Nevada, Inc. (Nestel 1st Supplemental Aff. ¶ 4; Ex. B.) In the Affidavit of Sale to Vision Nevada, Chase represented that the balance owing by Ms. Walters was $11,122.37. (Nestel 1st Supplemental Aff. ¶¶ 5, 6; Ex. A.) The balance of Ms. Walters' debt sold to Vision Nevada by Chase is also reflected on a cardholder's statement from Chase to Ms. Walters, which credits her with the last payment she made on her account. (Nestel 1st Supplemental Aff. ¶ 9; Ex. D.) The original signed credit card agreement between Chase and Ms. Walters is lost or has been misplaced. (Nestel 1st Supplemental Aff. ¶ 7.) A representative copy of the standard and typical credit card agreement that Ms. Walters would have signed provided for recovery of attorney fees in case Ms. Walters failed to comply with the terms and conditions of her credit card agreement. (Nestel 1st Supplemental Aff. ¶ 7; Ex. C.)
PDI is presently the owner of Ms. Walters' account, which originated with Chase, and which was sold to Vision Nevada. (Nestel 2d Supplemental Aff. ¶ 4.) Vision Nevada assigned, transferred, and conveyed to PDI all of its rights, title, and interest in and to Ms. Walter's account. (Nestel 1st Supplemental Aff. ¶ 5.)
Ms. Walters is a "consumer" as defined by § 1692a(3) of the FDCPA, in that PDI sought to collect an alleged debt from Walters, which was primarily incurred for personal, family, or household purposes. (Compl. ¶ 4; Answer ¶ 4.) PDI operates as a collection agency, and is a "debt collector" as defined by 15 U.S.C. § 1692a(6). (Compl. ¶¶ 5, 6; Answer ¶¶ 5, 6.)
On or about July 26, 2001, PDI, in an attempt to collect a consumer debt on behalf of Chase Manhattan Bank, sent Ms. Walters a form collection letter. (Compl., Ex. A; Compl. ¶¶ 7-8; Answer ¶¶ 7-8.) The letter stated:
Within 30 days of receipt of this notice you may notify us, by certified mail, if you dispute the validity of the debt, or any portion thereof. Unless we receive such notice, the debt will be assumed valid. If you notify us within the 30 day period that the debt, or any portion thereof, is disputed, we will obtain verification of the debt and a copy of such verification will be mailed to you along with the name and address of the original creditor.
(Compl., Ex. A.) This letter was PDI's first written communication to Ms. Walters regarding her alleged debt. (Compl. ¶ 13; Answer ¶ 13.) PDI did not have any further written communication with Ms. Walters regarding the alleged debt within five days after sending the letter to her. (Def.'s Mem. Supp. Def.'s Mot. Summ. J. at 2.)
Since the sale of Ms. Walters' account by Chase, Ms. Walters has made no payments. (Nestel 1st Supplemental. Aff. ¶ 11.) Ms. Walters has made no payment on her credit card account since September 2000. (Nestel 1st Supplemental Aff. ¶¶ 4, 11, Ex. D.) As of April 25, 2001, the balance on Ms. Walters' account was $11,122.37, $8,482.66 of which represented the principal amount, and $2,639.71 of which represented the accrued interest. (Nestel 1st Supplemental Aff. ¶ 12, Ex. E.)
On July 17, 2002, Ms. Walters filed a Complaint in this court under the FDCPA, alleging that PDI violated provisions of the Act. On October 9, 2002, Ms. Walters filed a Motion for Class Certification, which was denied by this court on June 3, 2003. On April 4, 2003, Plaintiff filed a Motion for Summary Judgment. On June 3, 2003, PDI filed its Response; PDI filed a Cross Motion for Summary Judgment on the FDCPA claim on June 3, 2003. On June 23, 2003, Ms. Walters filed her Reply in Support of the Plaintiff's Motion for Summary Judgment, and her Response in Opposition to the Defendant's Cross Motion for Summary Judgment. Defendant filed a Reply in Support of its Cross Motion for Summary Judgment on July 10, 2003.
On August 1, 2003, PDI filed a Motion for Summary Judgment on its counter claim against Ms. Walters. On October 3, 2003, Counter-Defendant filed a Response. Counter-Claimant filed a Reply on November 17, 2003. On December 9, 2003, this court granted Counter-Defendant's Motion for Leave to File a Surreply. That Surreply was filed on December 19, 2003. On November 8, 2002, Ms. Walters filed a Motion to Dismiss PDI's Counter Claim, on the grounds that supplemental jurisdiction could not be exercised over the Counter Claim. Ms. Walters' motion was denied on January 8, 2003.
II. Summary Judgment Standard
It is proper for a court to grant summary judgment "when the `pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'" Horkey v. J.V.D.B. Assocs., 333 F.3d 769, 772 (7th Cir.) (quoting Fed.R.Civ.P. 56 (c)), cert. denied, 124 S. Ct. 489 (2003). In determining whether summary judgment should be granted, the court construes all facts and draws all reasonable inferences from those facts to favor the non-moving party. Epps v. Creditnet, Inc., 320 F.3d 756, 758 (7th Cir. 2003) (citing Peele v. Country Mut. Ins. Co., 288 F.3d 319, 326 (7th Cir. 2002)). "`Summary Judgment is appropriate if, on the record as a whole, a rational trier of fact could not find for the non-moving party.'" Horkey, 333 F.3d at 772 (quoting Rogers v. City of Chi., 320 F.3d 748, 752 (7th Cir. 2003)). When both parties move for summary judgment, the court must "`construe all inferences in favor of the party against whom the motion under consideration is made.'" O'Regan v. Arbitration Forums, Inc., 246 F.3d 975, 983 (7th Cir. 2001) (quoting Hendricks-Robinson v. Excel Corp., 154 F.3d 685, 692 (7th Cir. 1998)).
"[I]f a defendant seeks to use an affirmative defense as a basis to resist a plaintiff's motion for summary judgment, the defendant must create at least a triable issue of fact as to the existence of each element of the defense." Herndon v. Mass. Gen. Life Ins. Co., 28 F. Supp. 2d 379, 382 (W.D. Va. 1998) (citing FDIC v. Giammettei, 34 F.3d 51, 54-55 (2d Cir. 1994); Office of Thrift Supervision v. Paul, 985 F. Supp. 1465, 1470 (S.D. Fla. 1997); Frankel v. ICD Holdings S.A., 930 F. Supp. 54, 64-65 (S.D.N.Y. 1996)); see also Conoco, Inc. v. J.M. Huber Corp., 148 F. Supp. 2d 1157, 1168 (D. Kan. 2001) (citations omitted); Angel Med. Ctr., Inc. v. Abernathy, 159 F. Supp. 2d 215, 218 (W.D.N.C. 2000) ("[A] defendant cannot rest upon mere allegations in an answer, but has an affirmative obligation to establish his affirmative defenses with affirmative proof." (citing Aldridge Motors v. Alexander, 9 S.E.2d 469 (N.C. 1940))). However, summary judgment may be granted only when "every one of the defenses asserted legally are insufficient." Wright, Miller Kane, Federal Practice and Procedure: Civil 3d § 2734. "Since a single valid defense may defeat recovery, [a] claimant's motion for summary judgment should be denied when any defense presents significant fact issues that should be tried." Id.
III. Cross Motions for Summary Judgment on Plaintiff's Claim Under the FDCPA
Ms. Walters argues that PDI violated §§ 1692g(a)(3), 1692e, and 1692e(10) of the FDCPA because the collection letter PDI sent to Plaintiff informed Ms. Walters that unless she notified PDI by certified mail that she disputed the debt, the debt would be presumed valid. ( See Compl., Ex. A.) Both parties have moved for summary judgment, and the material facts are not in dispute; thus, the only question is which movant is entitled to judgment as a matter of law.A. Section 1692g(a)(3)
The FDCPA imposes certain requirements on debt collectors in their communications with debtors in the course of collecting a debt. See Bartlett v. Heibl, 128 F.3d 497, 498 (7th Cir. 1997). Section 1692g(a)(3) provides:
(a) Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing —
. . .
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
. . .
15 U.S.C. § 1692g(a)(3). Plaintiff contends that PDI's letter violated the FDCPA because § 1692g(a)(3) does not require a consumer to dispute the validity of a debt in writing or by certified mail.
Although the text of PDI's letter only requires notification by certified mail, it is presumed that requirement of notification by certified mail necessarily includes a requirement that the notification be made in writing.
1. Writing Requirement
The Seventh Circuit has not yet decided the question of whether subsection (a)(3) requires the debtor to dispute the debt in writing. PDI argues that there is a writing requirement under subsection (a)(3), relying on a case from the Third Circuit, Graziano v. Harrison, 950 F.2d 107 (3d Cir. 1991), and various district court opinions that have followed the Graziano approach.
In Graziano, the Third Circuit held that a dispute pursuant to subsection (a)(3) must be in writing to be effective. 950 F.2d at 112. The Third Circuit's holding had two bases. First, the court reasoned that a holding that subsection (a)(3) did not have a writing requirement would lead to incoherent results. Under subsections (a)(4) and (a)(5) of § 1692g, the Act explicitly requires notification by writing. The Third Circuit feared that if it held that subsection (a)(3) did not require a writing, it would "create a situation in which, upon the debtor's non-written dispute, the debt collector would be without any statutory ground for assuming that the debt was valid, but nevertheless would not be required to verify the debt or to advise the debtor of the identity of the original creditor and would be permitted to continue debt collection efforts." Id. Second, the court reasoned that there are "strong reasons to prefer that a dispute of a debt collection be in writing: a writing creates a lasting record of the fact that the debt has been disputed, and thus avoids a source of potential conflicts." Id. Some federal district courts have followed the Third Circuit's reasoning in Graziano. See, e.g., Ingram v. Corporate Receivables, Inc., No. 02-C-6608, 2003 WL 21018650 (N.D. Ill. May 5, 2003); Castillo v. Carter, No. IP 99-1757-C, 2001 WL 238121 (S.D. Ind. Feb. 28, 2001); Sturdevant v. Thomas E. Jolas, P.C., 942 F. Supp. 426 (W.D. Wis. 1996).
Subsection (4) and subsection (5) of U.S.C. § 1692(a) provide:
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt of a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer's written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.15 U.S.C. § 1692g(a)(4)-(5).
Other district courts have disagreed with the Third Circuit's reasoning and have held that subsection (a)(3) does not impose a writing requirement on consumers. See, e.g., Spearman v. Tom Wood Pontiac-GMC, Inc., No. 1:00-c-1340, 2002 WL 31854892, at *6-8 (S.D. Ind. Nov. 4, 2002); Nasca v. GC Servs. Ltd. P'ship, No. 01CIV10127, 2002 WL 31040647, at *6 (S.D.N.Y. Sept. 12, 2002) (stating that "district courts in the Second Circuit have concluded that Section 1629g(a)(3) entitles debtors to dispute their debt by telephone" (citing Ong v. Am. Collections Enter., No. 98-cv-5117 (JG), 1999 WL 51816, at *4 (E.D.N.Y. Jan. 15, 1999); In re Risk Mgmt. Alternatives, Inc., 208 F.R.D. 493, 502 (S.D.N.Y. 2002); Brady v. Credit Recovery Co., 160 F.3d 64, 67 (1st Cir. 1998) ( 15 U.S.C. § 1692e(8) does not impose writing requirement))); Sambor v. Omnia Credit Servs., 183 F. Supp. 2d 1234, 1240 n. 4 (D. Haw. 2002) (citing Sanchez v. Robert E. Weiss, Inc., 173 F. Supp. 2d 1029, 1033 (N.D. Cal. 2001)); Harvey v. United Adjusters, 509 F. Supp. 1218, 1221 (D. Or. 1981).
In Spearman, this court held that subsection (a)(3) does not impose a writing requirement on the debtor. 2002 WL 31854892, at *6-8. Although the court in Spearman acknowledged that there were some reasons to prefer that a dispute of a debt's validity should be in writing, the court held that the preference for writing should not override Congress's intent as evidenced by its chosen statutory language. In the present case, the court again holds that § 1692g(a)(3) does not place a requirement on the consumer to dispute a debt in writing.
As explained in Spearman, several basic principles of statutory interpretation drive the court's reasoning. "The starting point for the interpretation of a statute is the language of the statute itself. Absent a clearly expressed legislative intention to the contrary, that language must ordinarily be regarded as conclusive." Sapperstein v. Hager, 188 F.3d 852, 857 (7th Cir. 1999) (internal quotations and citation omitted). Moreover, "[w]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion." Gozlon-Peretz v. United States, 498 U.S. 395, 404 (1991) (quotations omitted). The plain language of subsection (a)(3) does not require that the consumer dispute the validity of the debt in writing. Furthermore, the presence of a writing requirement in the subsections immediately following subsection (a)(3) demonstrates that this omission of a writing requirement in subsection (a)(3) was purposeful. Cf. Brady, 160 F.3d at 66-67 (stating that "the fact that other sections of the FDCPA . . . explicitly impose a writing requirement suggests that Congress's omission of such a requirement in § 1692e(8) was not inadvertent").
Additionally, in Spearman, this court explained that consideration of the purposes and effects of subsections (a)(3)-(5) and subsection (b) support this conclusion. A writing requirement for subsections (a)(4), (a)(5), and (b) makes sense. These subsections provide greater protections to consumers because they obligate the debt collector to take some affirmative action. Subsection (a)(4), for example, requires the debt collector, upon receiving written notification within thirty days from the consumer, to take an affirmative action: the debt collector is required, not only to obtain verification of the debt or a copy of a judgment, but is also required to mail such documents to the consumer. Subsection (a)(5) requires that upon the consumer's written notification within the thirty-day period, the debt collector has an affirmative duty to provide the consumer with the name and address of the original creditor, if different from the current creditor. Subsection (b) gives the consumer the power to stop all collection activities upon receipt of written notification from the consumer.
15 U.S.C. § 1692g(b) provides:
(b) Disputed debts
If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) of this section that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.15 U.S.C. § 1692g(b).
Subsection (a)(3), on the other hand, does not place any affirmative duties on the debt collector upon receiving notice from the consumer that the debt is disputed. Thus, subsection (a)(3) provides a more limited form of protection for the consumer, which is congruent with the more limited requirement from the consumer. Under (a)(3), upon notification from the consumer that the debt is disputed within thirty days, the debt collector cannot assume the debt is valid. "Thus, subsection (a)(3) provides some protection to those consumers who dispute a debt but are unable to do so in writing, perhaps the very consumers who are more likely to be unsophisticated." Spearman, 2002 WL 31854892, at *7.
"When reviewing documents for compliance with the FDCPA . . . [the court uses] the `unsophisticated debtor' standard." Veach v. Sheeks, 316 F.3d 690, 692-93 (7th Cir. 2003) (citing Marshall-Mosby v. Corporate Receivables, Inc., 205 F.3d 323, 326 (7th Cir. 2000); Bartlett v. Heibl, 128 F.3d 497, 500 (7th Cir. 1997)). "This assumes that the debtor is `uninformed, naive, or trusting,' and that statements are not confusing or misleading unless a significant fraction of the population would be similarly misled." Id. at 693 (citing Pettit v. Retrieval Masters Creditor Bureau, Inc., 211 F.3d 1057, 1060 (7th Cir. 2000)).
2. Certified Mail Requirement
In addition to the writing requirement, Plaintiff argues that the requirement that any dispute be sent to PDI by certified mail violates § 1692g(a)(3). As discussed above, it is evident from the plain language of § 1692g(a)(3) that a consumer is not required to notify the debt collector in writing that the debt is disputed in order to burst the presumption of the debt's validity. A certified mail requirement is even more offensive to the plain language of § 1692g(a)(3). Even the provisions of § 1692g(a) that require written notification do not include a requirement that notification be sent by certified mail. A requirement of notification by certified mail places two burdens on the consumer: cost and time. In the present case, the parties seem to agree that the certified mailing requirement would have cost Ms. Walters $4.00. Additionally, in order to comply with a certified mail requirement, a consumer would likely have to go to the post office or some other mail carrier in order to have the letter certified, which would require the debtor to take time out of the day to make a trip to a post office, which is open during limited hours of the day when many individuals may have to be at work. The court is unwilling to interpret the text of the Act to place such a costly burden on consumers when the plain language does not indicate that a certified mail requirement was intended.
PDI argues that a certified mail requirement protects both the debtor and debt collector because it insures that the debt collector receives a copy of any such protest and that the debtor has proof that the debt collector received such a protest. However, PDI does not offer an explanation for why the consumer, as opposed to the debt collector, should bear the burden. For example, these ends could also be obtained if PDI paid for the cost of sending a letter by certified mail or if PDI sent a return letter to the debtor confirming that it had received the consumer's protest letter. Furthermore, such a holding would have implications for the rest of the provisions under § 1692g. If § 1692g(a)(3), which does not even have a writing requirement, was held to require notification by certified mail, then certainly a certified mail requirement would be required under the provisions of the Act that do explicitly require writings, including § 1692g(a)(4) and § 1692g(a)(5), pursuant to which debt collectors are required to send consumers written proof of the debt. However, this court's research has not revealed any cases in which a court has held that there is a certified mail requirement placed on the debt collector under § 1692g(a). In fact, the Ninth Circuit has held that a debt collector is not required to establish that the consumer actually received a validation of debt notice under the plain language of the text of § 1692g(a). See Mahon v. Credit Bureau of Placer County, Inc., 171 F.3d 1197, 1201 (9th Cir. 1999) ("The plain language of section 1692g(a) does not require that a Validation of Debt Notice must be received by a debtor. Instead, the plain language states that such a Notice need only be sent to a debtor."). In sum, any purported advantage of a certified mail requirement does not outweigh the intent of the legislature, which is demonstrated through the plain text of § 1692g(a)(3).
PDI also argues that a fee of $4.00 is de minimus and that if Ms. Walters did not believe she owed such a significant sum of money to PDI, a $4.00 investment to ensure that her protest was received by PDI is de minimus at best. To the extent that this is an argument regarding award of attorney fees, such argument will be explored in a separate Entry. Otherwise, this argument is already adequately addressed.
B. Sections 1692e 1692e(10)
Plaintiff also contends that the certified mail requirement violates §§ 1692e and 1692e(10) of the FDCPA. Sections 1692e and 1692e(10) provide:A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
. . . .
(10) The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.15 U.S.C. §§ 1692e, 1692e(10).
The test for determining whether there has been a violation of § 1692e is an objective test, "turning not on the question of what the debt collector knew but on whether the debt collector's communication would deceive or mislead an unsophisticated, but reasonable, consumer." Turner v. J.V.D.B. Assocs., 330 F.3d 991, 995 (7th Cir. 2003) (citing Gammon v. GC Servs. Ltd. P'ship, 27 F.3d 1254, 1257 (7th Cir. 1994); id. at 1259 (Easterbrook, J., concurring)). Moreover, a debt collector may be liable under § 1692e even if the false representation was not intentional. Id. (citing Gearing v. Check Brokerage Corp., 233 F.3d 469, 472 (7th Cir. 2000) (citing Russell v. Equifax A.R.S., 74 F.3d 30, 33 (2d Cir. 1996))). The question of whether a letter is confusing is for the court to decide. Bartlett, 128 F.3d at 501.
In Spearman, this court found that the assertion in a debt collection letter that the dispute of the debt's validity was required to be in writing, when it does not, was false, and therefore violated § 1692e. 2002 WL 31854892, at *9. Similarly, in the present case, the assertion that the dispute of the debt's validity must be sent by certified mail, when the text of § 1692g(a)(3) does not require notification by certified mail, is false, and consequently, misleading. Thus, Plaintiff is entitled to summary judgment under §§ 1692e and 1692e(10).
C. Section 1692k(c) Bona Fide Error Defense
Defendant raised a bona fide error affirmative defense under § 1692k(c) in its Answer, but only mentioned it once, and without any argument, in the introduction to its Memorandum in Support of Defendant's Motion for Summary Judgment and in Opposition to Plaintiff's Motion for Summary Judgment. "[A] debt collector that violates § 1692e, or any other substantive provision of the FDCPA, can avoid liability by proving by a preponderance of the evidence that (1) the violation was unintentional, resulting from a `bona fide error,' and (2) that error occurred `not-withstanding the maintenance of procedures reasonably adapted to avoid any such error.'" Turner, 330 F.3d at 995-96 (quoting Jenkins v. Heintz, 124 F.3d 824, 828 (7th Cir. 1997)). "A defendant debt collector bears the burden of proving this bona fide error defense." Frye v. Bowman, Heintz, Boscia Vician, P.C., 193 F. Supp. 2d 1070, 1077 (S.D. Ind. 2002) (citing Fox v. Citicorp Credit Servs., Inc., 15 F.3d 1507, 1514 (9th Cir. 1994)). Defendant has not presented any evidence in support of this affirmative defense. Moreover, Defendant asserted in both briefs on the cross-motion that there were no material issues of fact to preclude entry of summary judgment. Thus, the court finds that Defendant is not entitled to summary judgment in its favor under the defense of bona fide error because PDI has not presented any evidence in support of a bona fide error defense. See Bitah v. Global Collection Servs., Inc., 968 F. Supp. 618, 623 (D.N.M. 1997); Cacace v. Lucas, 775 F. Supp. 502, 505-06 (D. Conn 1990). Furthermore, Defendant has waived its right to present evidence of a bona fide error defense to demonstrate that issues of fact exist for this matter to proceed to a trier of fact. See Picht v. John R. Hawks, Ltd., 236 F.3d 446, 451 (8th Cir. 2001).
Ms. Walters' Motion for Summary Judgment will be GRANTED on the claims brought under §§ 1692g(a)(3), 1692e and 1692e(10) of the FDCPA; PDI's Motion for Summary Judgment will be DENIED.
IV. Counter-Claimant's Motion for Summary Judgment on Action to Recover Delinquent Debt
PDI moves for summary judgment on its counterclaim against Ms. Walters. Ms. Walters does not move for summary judgment, but has invited the court to grant summary judgment sua sponte in its favor. PDI raises two theories of liability: breach of contract and accounts stated. Ms. Walters does not contend that PDI is unable to demonstrate the elements of either an action for breach of contract or accounts stated. Instead, Ms. Walters raises three defenses to the Counter-Claimant's Motion for Summary Judgment. First, she argues that there is a genuine issue of material fact as to whether PDI is the real party in interest. Second, she argues that the debt is void under the Indiana Uniform Consumer Credit Code. Third, she argues the defense of laches.A. Real Party in Interest
Ms. Walters argued in her Brief that PDI failed to establish that it is the present owner of Ms. Walters' alleged account, and hence, the real party in interest because the Nestel affidavit only stated that PDI was assigned the account, and failed to state that PDI is the present and current owner of Ms. Walters' account. In response to Ms. Walters' argument, PDI filed a second supplemental affidavit of Cynthia Nestel on November 17, 2003. The affidavit states:
4. That PDI is the owner of the Jane Walters Chase Manhattan account, which is the subject matter of PDI Management Services, Inc.'s Counter-Claim in this case.
5. That PDI has been the owner of the Jane Walters account which is the subject matter of PDI's Counter-Claim in this matter throughout the course of the litigation and proceedings in this case.
(Nestel 2d Supplemental Aff. ¶¶ 4-5.) Consequently, Ms. Walters' first argument is no longer of issue.
Additionally, Ms. Walters argues that the testimony of Vincent Galewick, president and owner of PDI and Vision Nevada, contradicts PDI's assertion that it is the real party in interest and therefore creates an issue of material fact. Mr. Galewick testified that PDI no longer does business in Indiana and that all of PDI's uncollected accounts were sold to another party. (Galewick Dep. at 6:16-20; 7:3-7.) According to Ms. Walters, this suggests that PDI is not the real party in interest because if PDI sold all of its Indiana accounts, then it would have sold Ms. Walters' account as well. Thus, Mr. Galewick's testimony contradicts Ms. Nestel's Affidavit and creates an issue of fact concerning whether PDI is still the owner of Ms. Walters' account. However, an examination of Mr. Galewick's testimony reveals that there is no contradiction. Although Mr. Galewick provides some testimony regarding the Indiana accounts, Mr. Galewick repeatedly qualifies his statements, demonstrating his lack of personal knowledge. For example, in response to the question about whether PDI has a license in Indiana, he states: "Once again, I'm not really the person that would be aware of what we specifically did in Indiana." ( Id. at 6:11-12.) Additionally, in response to the question of whether Ms. Walters' account was sold, Mr. Galewick replies: "I'm not specifically aware. I am just generally aware that we started selling our Indiana accounts." ( Id. at 7:14-15.) Because Mr. Galewick admits that he lacks personal knowledge about the Indiana accounts throughout his testimony, the court finds that Mr. Galewick's testimony does not contradict Ms. Nestel's Affidavit. Ms. Walters has not introduced any other evidence to demonstrate that there is an issue of fact concerning PDI's standing to bring its claim against Ms. Walters. As such, Ms. Walters has failed to create a genuine issue of fact concerning PDI's standing to bring its claim.
B. Indiana Uniform Consumer Credit Code
Next, Ms. Walters argues that the debt is void under the Indiana Uniform Consumer Credit Code (IUCCC) because PDI took assignment of her debt and attempted to collect the debt when PDI is not a supervised financial organization or licensed to make consumer loans in Indiana. PDI argues that the provision Ms. Walters claims PDI violated is not applicable to PDI.
The pertinent portion of the IUCCC provides:
Authority to make consumer loans. — Unless a person is a supervised financial organization or has first obtained a license from the department, the person shall not regularly engage in this state in the business of:
(a) making consumer loans; or
(b) taking assignments of and undertaking direct collection of payments from or enforcement of rights against debtors arising from consumer loans.
However, an assignee may collect and enforce for three (3) months without a license if the assignee promptly applies for a license and the assignee's application has not been denied.
IC § 24-4.5-3-502. Ms. Walters argues that her debt is void because PDI violated IC § 24-4.5-3-502 because PDI is not a supervised financial organization and has not obtained an Indiana license to make consumer loans. PDI does not contend that it was licensed in Indiana or that it qualifies as a supervised financial organization. PDI argues that IC § 24-4.5-3-502 is not applicable to PDI because 1) PDI does not regularly engage in business in Indiana and 2) because PDI did not directly attempt to collect payments from Ms. Walters.
Under the remedies and penalties provision of the IUCCC, a debtor may seek the following remedy for the violation:
(2) If a creditor has violated the provisions of this Article applying to authority to make consumer loans (IC § 24-4.5-3-502), the loan is void and the debtor is not obligated to pay either the principal or loan finance charge. If the debtor has paid any part of the principal or of the loan finance charge, the debtor has a right to recover the payment from the person violating this Article or from an assignee of that person's rights who undertakes direct collection of payments or enforcement of rights arising from the debt. . . .
IC § 24-4.5-5-202(2). Ms. Walters has the burden of proof on the claim that PDI violated this provision. See Kendrick v. Jim Walter Homes, Inc., 545 F. Supp. 541, 543 (S.D. Ind. 1981) ("Penalties of the magnitude contemplated by this statute are not to be imposed absent a showing that a consumer credit lender, seller, or lessor has violated the respective provisions to which those penalties relate.").
The court need address the parties' dispute over the meaning of "regularly engage" or "direct" because IC § 24-4.5-5-202(2) only applies to "creditors" and PDI is not a creditor under the Act. The plain text of IC § 24-4.5-5-202(2) explicitly provides for remedies in cases where a creditor violates IC § 24-4.5-3-(502). "When construing a statute, the legislature's definition of a word binds [the courts]. When the legislature has not defined a word, [courts] give the word its common and ordinary meaning." UFG, LLC v. Southwest Corp., 784 N.E.2d 536, 545 (Ind.Ct.App. 2003) (internal quotations and citations omitted). Morever, "when interpreting the words of a single section of a statute, [the court] must construe them with due regard for all other sections of the act and with regard for the legislative intent to carry out the spirit and purpose of the act." B.K.C. v. State, 781 N.E.2d 1157, 1167 (Ind.Ct.App. 2003). A "creditor" is defined by the Article as follows:
"Creditor" means a person:
(a) who regularly engages in the extension of consumer credit that is subject to a credit service charge or loan finance charge, as applicable, or is payable in installments; and
(b) to whom the obligation is initially payable, either on the face of the note or contract, or by agreement when there is not a note or contract.
IC § 24-4.5-1-301(8). The Article's definition of creditor does not include assignees. Thus, 5-202(2) is not applicable to PDI because PDI is not a creditor as defined by this Article because the obligation on Ms. Walter's account was initially payable to Chase, not PDI. Cf. Kueter v. Chrysler Fin. Corp., No. Civ.A.CV-98-202, 2000 WL 33675724, at *3-4 (Me. Super. Aug. 23, 2000); see also Reagan v. Racal Mortgage, Inc., 135 F.3d 37, 41 (1st Cir. 1998).
Moreover, an examination of the plain language and structure of IC § 24-4.5-5-202(2) shows that the legislature only intended to void those loans that were made by creditors who had no authority to make them, not loans that a person who has no authority to collect on is attempting to collect. Although 5-202(2) permits a debtor to recover from an assignee in the event the debtor has made any payments, this is only applicable if the assignee takes assignment of a debt that was made in violation of 3-502. Chase, is the original creditor under the Act. Ms. Walters does not claim or have any evidence to show that Chase was not a supervised financial organization or unlicensed in Indiana. In fact, Ms. Walters stated in her Response Brief: "The original lender in this case, Chase Manhattan Bank, was a National Bank which has the right under certain circumstances to `export' the rates permissible in its home state (on information and belief, Delaware) to Indiana transactions." (Counter-Def.'s Response Opp'n Counter-Claimant's Mot. Summ. J. at 11.) The court finds that Ms. Walters has failed to produce evidence to create a genuine issue of material fact concerning whether the debt is void because PDI violated IUCCC.
C. Laches
In Surreply, Ms. Walters raised the argument that PDI's claim is barred by the doctrine of laches. Ms. Walters claims that PDI has inexcusably delayed in asserting its rights against Ms. Walters to collect the debt and the interest on the debt, thereby resulting in prejudice to the Counter-Defendant. Under Local Rule 56.1(d), the non-movant is permitted to file a Surreply only to address evidence cited by the moving party in the reply brief or to address the moving party's objections to the admissibility of the non-movant's evidence. Ms. Walters moved for leave to file a Surreply in opposition to PDI's Reply Brief. The court granted Ms. Walters motion, but limited briefing to two issues: 1) the newly submitted supplemental affidavits and 2) the meaning of the phrase "regularly engaged." ( See Dec. 9, 2003, Entry Pl.'s Mot. Leave File Surreply.) Ms. Walters' argument in Surreply raising the defense of laches exceeds the scope of Local Rule 56.1 and the court order. Moreover, because Ms. Walters raised the defense of laches for the first time in Surreply, PDI has not had an opportunity to respond.However, the court need not consider the prejudice to PDI in not having an opportunity to respond because the court finds that Ms. Walters has failed to demonstrate that the defense of laches applies. Additionally, she has failed to produce sufficient evidence with respect to each element of the defense to show that there is a genuine issue of material fact for trial. Laches is an affirmative defense, which Ms. Walters must demonstrate by a preponderance of the evidence. Sanders v. State, 733 N.E.2d 928, 930 (Ind. 2000). Laches is a question of fact, which is resolved by the trial court "in the exercise of its sound discretion from the facts and circumstances of each case." Ebersol v. Mishler, 775 N.E.2d 373, 378 (Ind.Ct.App. 2002) (citing Shafer v. Lambie, 667 N.E.2d 226, 231 (Ind.Ct.App. 1996)).
First, it is unclear under Indiana law that the doctrine of laches would apply to a suit at law. The Seventh Circuit has recognized that the doctrine of laches, although an equitable doctrine, is "increasingly applied in cases at law." See Maksym v. Loesch, 937 F.2d 1237, 1247-48 (7th Cir. 1991) (citing Moore v. Phillips, 627 P.2d 831, 835 (Kan.Ct.App. 1981); Harris v. Beynon, 570 F. Supp. 690, 692 n. 3 (N.D. Ill. 1983)). But in Maksym, the Seventh Circuit, applying Illinois law, held that, under Illinois law, laches is not a defense in cases at law. 937 F.2d at 1248. Similarly, under Indiana law, the doctrine of laches does not appear to have expanded beyond equity cases. See, e.g., Shriner v. Sheehan, 773 N.E.2d 833, 846 (Ind.Ct.App. 2002) ("Laches is an equitable doctrine that may not be applied arbitrarily or in the absence of conformity with general principles of equity." (citing Lowry v. Lowry, 590 N.E.2d 612, 621 (Ind.Ct.App. 1992))).
Second, Ms. Walters has not presented evidence in support of each of the elements of the affirmative defense. This is problematic because Ms. Walters would have the burden of proof on the affirmative defense of laches at trial. "Laches is comprised of three elements: 1) inexcusable delay in asserting a known right; 2) an implied waiver arising from knowing acquiescence in existing conditions; and 3) a change in circumstances causing prejudice to the adverse party." Ebersol, 775 N.E.2d at 378 (citing Shafer, 667 N.E.2d at 231). In the present case, there is no evidence of delay in asserting a right by PDI. On July 17, 2001, PDI acquired ownership of Ms. Walters' account. (Nestel 2d Supplemental Aff. ¶ 9.) Approximately nine days later, on or about July 26, 2001, PDI sent a collection letter to Ms. Walters, which notified her of PDI's intent to collect the overdue payments. (Compl., Ex. A.) The court is unwilling to hold that a debt collector must immediately file a civil suit against a debtor in order to prevent any potential actions from being barred by the doctrine of latches. It is reasonable for a debt collector to attempt to recover payments from a debtor through other, less formal and less expensive means before bringing a civil action. Similarly, there is no indication on the record that PDI acquiesced to Ms. Walters' non-payment of overdue funds. Instead, PDI actively sought out the payments by sending Ms. Walters a collection letter. Thus, Ms. Walters claim that the doctrine of laches bars PDI's claim fails.
All of the defenses raised by Ms. Walters are legally deficient. Ms. Walters has failed to demonstrate that there is a genuine issue of material fact to preclude summary judgment in favor of PDI.
PDI admits that the original credit card agreement between Ms. Walters and Chase has been lost. Without evidence of the contract, PDI is not entitled to judgment as a matter of law for breach of contract.
An account stated is an agreement between the parties that all items of an account and balance are correct, together with a promise, expressed or implied to pay the balance. It operates as a new contract without the need for renewed consideration, and the plaintiff does not need to plead and prove the creation and performance of each contract underlying the account.
An agreement that the balance is correct may be inferred from delivery of the statement and the account debtor's failure to object to the amount of the statement within a reasonable amount of time. When the underlying facts are in dispute, the question of what constitutes a reasonable amount of time is a question of fact and law.
The amount indicated on a statement is not conclusive, but it is prima facie evidence of the amount owed on the account. Once a prima facie case is made on an account stated, the burden of proof shifts to the account debtor to prove that the amount claimed is incorrect. . . .B.E.I., Inc. v. Newcomer Lumber Supply Co., 745 N.E.2d 233, 236-37 (Ind.Ct.App. 2001) (internal quotations and citations omitted).
Ms. Walters made a final payment on the account in September 2000. The last credit card statement sent to Ms. Walters by Chase was dated April 24, 2001. (Nestel 1st Supplemental Aff. ¶ 10, Ex. E.) Under IC § 24-4.6-1-103, an interest rate of 8% per annum is permitted "from the date an itemized bill shall have been rendered and payment demanded on an account stated." IC § 24-4.6-1-103. PDI's Motion for Summary Judgment for accounts stated will be GRANTED.
V. Conclusion
For the foregoing reasons, Plaintiff's Motion for Summary Judgment on Plaintiff's claims under §§ 1692g(a)(3), 1692e and 1692e(10) of the Fair Debt Collection Practices Act will be GRANTED; Defendant's Motion for Summary Judgment on Plaintiff's claims under the FDCPA will be DENIED. Additionally, Counter-Claimant's Motion for Summary Judgment on the claim of accounts stated will be GRANTED. This leaves for determination issues of damages and attorney fees on the claims and counterclaim. A telephone conference will be set to establish a schedule for the disposition of these remaining issues. Final judgment in this case will be rendered after the disposition of these remaining issues.ALL OF WHICH IS ORDERED.